There is no silver bullet for driving growth, but there is a proven formula: revenue architecture.
Revenue architecture is a holistic framework for creating a seamless, efficient, and scalable revenue engine. Though “revenue” seems to scream for-profit, revenue architecture is for any organization wanting to build programs or products without worrying about how to fund or sell them – regardless of which sector you’re in.
Whether you’re a startup looking to scale or a non-profit seeking sustainable funding growth, here are the revenue architecture principles and practices that can transform your organization’s trajectory, directly from our resident Winning by Design-certified Revenue Architect, Brian.
What Is Revenue Architecture?
Revenue architecture is a strategic framework designed to optimize and align all revenue-related aspects of an organization, including marketing, sales, onboarding, and customer success. Aligning these functions is crucial for several reasons:
- Shared Goals: When marketing, sales, onboarding, and customer success teams work toward the same objectives, it eliminates silos and fosters a collaborative environment where every team’s efforts contribute to the same goals.
- Improved Efficiency: Streamlining processes and removing redundancies reduces costs and accelerates growth by making the most of your available resources.
- Enhanced Customer Experience: Well-aligned revenue architecture means your customers will enjoy the same experience at every touchpoint, putting them on the path toward satisfaction and loyalty.
- Scalability: As you grow, a robust revenue architecture helps you scale without losing effectiveness. That means you’ll do more of what works while adapting to evolving demand and market conditions.
The 6 Core Principles of Revenue Architecture
For revenue architecture to work, it must integrate several core principles organization-wide.
Every go-to-market strategy we create is built around:
1. Creating a Revenue Engine
A revenue engine is the heart of your revenue architecture. It integrates the steps a customer will take – from awareness to loyalty – into key organizational processes, including marketing, sales, onboarding, and customer success. The goal is to generate revenue consistently and sustainably by pulling each lever at the right time and in the right way (for example, you might deploy marketing to attract leads and sales to close them).
As you build your engine, allocate your budget strategically across the system to lower customer acquisition costs and increase customer lifetime value. Remember, too, that unification is important. The above components should function as a team, not individual silos, and should all contribute to and pull from a centralized data model.
2. Scaling in a Particular Order
In revenue architecture, scaling is strategic and systematic. Instead of guessing about your next location, product category, or program, you should instead prioritize the steps and functions that will make your expansion scalable.
There is no one right way, but when we serve as a business’s interim chief revenue officer (CRO), we generally recommend these three steps: (1) find and validate product-market fit — i.e., there is a market demand for what you do — (2) develop an optimal go-to-market strategy to fulfill that demand, and (3) scale the infrastructure and operations that work.
3. Approaching Sales and Marketing as a Bowtie
Many organizations see sales and marketing as a funnel where leads enter at the top and convert to customers at the bottom. But how sales and marketing work in practice is more like a bowtie, where sales is in the middle and there’s selling to do on either side of that first purchase or donation.
We find that the bowtie model is a more accurate visual for the true, ongoing nature of sales and marketing. Marketing generates leads and nurtures and qualifies them over time. Sales closes leads and continues the conversation after the first conversion to foster customer loyalty and generate even more revenue.
4. Building Strategies Based on Deal Size and Volume
Your goal should be to tailor strategies just right for the deal size and volume — not too big (i.e. too expensive for the revenue you’ll earn) or too small (i.e. too few touchpoints to close the deal).
Customizing your strategy is always the way to go, but some common sales and marketing strategies are:
- Product-Led Strategy: The product is on your website and acts as its own marketing and sales tool, with the option to purchase right then and there. Sales will be high-volume, but the value of each sale will be low, so you’ll minimize sales and marketing costs.
- One-Step Strategy: An inside sales rep handles online chat or email and can close the deal on their own. You’ll still have somewhat high-volume sales and the deal value may be higher, so it makes sense to use a salesperson.
- Multi-Stage Strategy: An account manager will work on several accounts, collaborating with a broader team to stay hands-on with the prospect over time. Your sales volume will be low, but each deal will be worth hundreds of thousands of dollars, so engaging teams of 10 to 20 salespeople is worth it.
5. Leveraging Data to Make Decisions
Data is pivotal to revenue architecture because it becomes the foundation for your decision-making. The good news is that data is more accessible than ever, but the challenge is ensuring the quality and integrity of that data.
To fully commit to revenue architecture, you’ll need a data model for capturing critical data at every stage, from awareness to conversion to loyalty and beyond. That data should be consistent across the enterprise; customer success must have the same data marketing does. Finally, you should benchmark your data. Knowing your email open rates is great, but it’s much more meaningful if you know how those rates compare to organizations like yours.
6. Putting a Chief Revenue Officer (CRO) in Place
Any good revenue engine will have a CRO at its helm, whether it’s an in-house CRO or a fractional CRO, like RevUp. The CRO should ideally be singularly focused on ensuring that all revenue-related functions within your organization are efficient and aligned.
Generally, you can expect your in-house or fractional CRO to allocate your budget across departments, create metrics and dashboards to track organization-wide progress, train and coordinate teams, and benchmark your wins against similar organizations.
What Happens Without Revenue Architecture?
Without revenue architecture, it’s all too easy for for-profit and nonprofit organizations alike to get in their own way. Here are some of the common ways we see organizations across sectors impeding their growth and success:
- Overemphasis on Sales: Many organizations lacking a cohesive revenue architecture focus on closing deals at all costs. This creates the perfect environment for aggressive sales tactics, poor customer experiences, and a weak reputation.
- Reduced Profitability: Organizations may spend more, earn less, and lose time to inefficiency if they don’t understand how all revenue-related functions contribute to customer acquisition costs, lifetime value, and more.
- Siloed Teams: Marketing can all too easily conflict with sales if one doesn’t know what the other is doing or why, diluting the impact of any one tactic and missing the opportunity for collaboration and synergy.
- Too Many Go-to-Market Strategies: Siloes can also cause organizations to adopt disparate, competing go-to-market strategies, which can confuse customers and muddle your market identity.
- Decisions Made on Instinct vs. Data: Organizations without data may rely on instinct or anecdotal evidence, which can be misleading and cause you to miss market dynamics critical to your business.
How Does Revenue Architecture Apply to Nonprofits?
While it’s true that revenue architecture has long been at the heart of successful for-profit businesses, it’s equally relevant for nonprofits. Here’s why:
- Data-driven decisions are better decisions: Just like for-profit businesses, nonprofits need to leverage data to drive decision-making. By collecting and analyzing key data such as donor giving trends, ROI metrics on fundraising strategies (such as cost per dollar raised, cost per FTE, etc), profitability metrics for key programs, and other data, nonprofits can better understand how to optimize their development resources to maximize their impact.
- Renewing and upgrading current donors is much more cost-effective than acquiring new ones: Many nonprofits focus on growth through new networks and new donors, but the data show that the most growth happens by systematically stewarding and upgrading your current donor base. Revenue architecture principles can help nonprofits develop comprehensive donor engagement strategies that build lasting relationships and inspire continued and expanded support.
- Funding and impact are mutually reinforcing: Program and fundraising teams often have different priorities, but they’re important parts of the same whole. The most strategic (read: biggest) funders are going to care the most about ensuring their investments drive measurable, demonstrable impact, so it’s critical that the fundraising and programmatic functions are meaningfully aligned. Revenue architecture helps integrate these functions to ensure they’re efficient and collaborative without compromising the organization’s mission and financial goals.
Take a Step Toward Revenue Architecture
Revenue architecture is a journey, not a destination. And like any journey, it starts with a single step: assessing your current processes and developing a roadmap for what’s next.
Want to learn more about revenue architecture and how it can work for you? Let’s talk.